Introduction - the Best Paid Non-Profit Hospital System CEO in 2008
In 2009, we first discussed the compensation given to Dr Herbert Pardes, the CEO of New York - Presbyterian Healthcare System, which appeared to make him one of the best paid, if not the best paid non-profit hospital system CEO in the US. His total compensation for 2008 was $9.8 million, according to the NY Post. While his compensation was lower in 2007, approximately $5.1 million, 9 other executives made over $1 million, and the 10 together made over $26 million. This amount was approximately 20% of the system's total surplus, and 1% of its total budget.
The Times reported that since then, Dr Padres continued to do very well financially,
Dr. Pardes’s compensation has consistently been among the highest of any New York hospital C.E.O. His compensation in 2011, his last year as chief executive, was $4.1 million, including base pay of $1.7 million and a bonus of $1.8 million.
Retirement Means Never Having to Lose Your Paycheck
According to the Times, after Dr Pardes retired in 2011,
The next year, Dr. Pardes earned $5.6 million, which included $1 million in base salary, a $1.8 million bonus for his final year as chief executive and more than $2 million in deferred compensation, according to hospital tax records. That exceeded the amount earned by Dr. Pardes’s successor, Dr. Steven Corwin, who made $3.6 million that year.Three years after retirement, Dr. Pardes is still employed by the hospital as the executive vice chairman of its board of trustees, a position that compensation experts say is rare in the nonprofit world,...
Senator Charles E. Grassley, Republican of Iowa, who has been pressing for tax-exempt hospitals to be more accountable for the salaries they pay, said on Tuesday that Dr. Pardes’s compensation was an example of how 'major nonprofit hospitals often are indistinguishable from for-profit hospitals in their operations.' The senator added: 'It’s not enough to say high compensation is necessary and leave it at that. A nonprofit hospital should show how that compensation benefits its patients.'
'To have a former C.E.O. on the board is actually a big no-no,' said Uwe Reinhardt, a Princeton University health care economist. 'It’s not considered good board manners. Inevitably they begin to meddle and micromanage.'
Frank A. Bennack Jr., the chairman of the hospital and former chief executive of the Hearst Corporation (and executive vice chairman of the Hearst board, in a role similar to Dr. Pardes’s), said in a statement that Dr. Pardes was 'extraordinary' and was kept on for 'urgent fund-raising activities and a range of other institutional needs with which he could assist his superb successor.'
The hospital’s tax return, which is public because the organization is a nonprofit, said that in paying its executives, NewYork-Presbyterian looked at compensation patterns in nonprofit and for-profit health care systems. Michael L. Wyland, a partner in a consulting firm to health care and other nonprofits, said that was permissible, because 'the I.R.S. explicitly allows comparison with for-profit as well as nonprofit entities.'
But Dr. Reinhardt, who said he was friendly with Dr. Pardes, and Mr. Wyland agreed that while Dr. Pardes’s position was unusual, it might not be unjustified. They said that after 12 years as chief, he had presumably forged strong relationships with donors that the board would consider worth paying handsomely to maintain.They said that running a hospital was as challenging as running many corporations, because doctors tended to resent authority and because the job required not only management skills but also an understanding of government reimbursements, the insurance industry and medical and malpractice issues.
It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use here, here here, here, here, and here, and here.
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).
The talking points are usually supplied by hospital public relations personnel, sometimes by hospital trustees or executives, sometime by various health care consultants. The talking points are rarely questioned.